Nike Shares Surge, Lifting Consumer Sector ETFs | ETF Trends

Nike (NYSE: NKE) surged Friday to a record high after a stellar full-year outlook, lifting consumer discretionary sector-related exchange traded funds.

On Friday, the iShares U.S. Consumer Goods ETF (IYK) rose 1.1%, and Consumer Discretionary Select Sector SPDR (NYSEArca: XLY) gained 0.6%.

Meanwhile, Nike shares jumped 15.0% on Friday. NKE makes up 5.4% of IYK’s underlying portfolio and 4.3% of XLY.

Nike rallied after the sportswear maker projected full-year sales topping $50 billion as the company rebounds from the coronavirus pandemic, CNBC reports.

Bolstering the outlook, sales in greater China is improving, with Nike management confident that the company can regain trust with Chinese customers after threats to boycott Western brands over comments expressing concern about alleged forced labor in Xinjiang.

“These are times when strong brands can get stronger, and each quarter this reality becomes even more clear,” Nike Chief Executive Officer John Donahoe said during an earnings call Thursday.

Additionally, Nike sees global shoppers returning and buying new sneakers and fashion-forward sweatsuits to wear as economies reopen and pent-up consumers begin to go out again.

“Management’s confidence is hitting an inflection, and Q4 results indicate the digitally-driven acceleration in the financial model,” Cowen & Co. analyst John Kernan said in a note to clients, projecting the company’s market cap to one day surpass $300 billion.

Telsey Advisory Group analyst Cristina Fernández argued that Nike is capitalizing on its membership program, higher full-price selling, use of data, and a wholesale model with strong partners like Foot Locker.

“The strong momentum in Nike’s brand globally is more than offsetting pressure in China and supply chain constraints,” Fernandez said in a note to clients.

At least 12 brokerages have already upgraded their price targets on Nike after the fiscal fourth-quarter release.

“The company is emerging from the Covid period into the biggest [profit and loss]evolutions in our coverage universe,” Credit Suisse analyst Michael Binetti said.

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